You’ve worked your entire life, and now it’s time to finally enjoy your retirement years.
We all look forward to retirement, but when this new chapter of life begins, so do new experiences. You might be surprised by what you don’t know about retirement – from social security benefits to retirement age itself.
Don’t stay in the dark! Gain peace of mind heading into retirement by familiarizing yourself with these little known retirement facts.
Full Retirement Age is Not 65
While technically you can start claiming Social Security benefits at age 62, the full retirement age at which you become eligible to claim all of your Social Security benefits starts at age 66. For people born in 1960 or after the full retirement age will be 67.
The Social Security Administration’s increase in retirement age is a result of the rise in life expectancy – the idea is that if people are living longer, there is evidence to back the rise in the retirement age.
Regardless of the retirement age requirements, be sure to keep in mind that you still become eligible for Medicare benefits three months before your 65th birthday.
Waiting Until Full Retirement Age to Enroll in Medicare Could Cost You
Waiting until full retirement age to enroll in Medicare could be costly for you.
While people age 65 aren’t eligible for full retirement, they are eligible for full Medicare benefits.
You should enroll for them during your Initial Enrollment Period (IEP). The IEP is the seven-month window around your 65th birthday (three months before and the three months after your birth month).
If you miss your window, you could face gaps in health insurance coverage, incur late enrollment penalties, and have to wait for another enrollment period such as the Annual or General Enrollment Periods, which at specific times of the year.
Some States Tax Social Security Benefits
If you’ve qualified for Social Security benefits, you probably have taken some solstice in the fact that you will receive a Social Security check each month for the rest of your life.
Although that is true, your state might tax your benefits.
Those taxes could affect up to 85% of your total benefit if your individual income is over $34,000 per year ($44,000 per couple). Thirteen states currently impose taxes on Social Security benefits. Check with your state tax agency to see where your state stacks up to ensure you are realistic about the Social Security benefits you’ll be able to use for day-to-day expenses.
Social Security Won’t Likely Cover All Of Your Expenses
Retirement living has its benefits, but it’s not free. That’s why financial planners recommend building retirement savings and planning for the future. Financial planning is essential to ensure that you have the money you need to not simply “get by” but to enjoy your retirement.
Creating a budget is the best place to start. If you haven’t been diligent about budgeting in the past, now is a great time to start planning for your monthly expenses and long term goals.
Financial planners suggest that you need to replace 80% of your income once you retire. Likely, your Social Security benefits will not meet that benchmark.
Social Security provides a standard of living comparable to the bottom quarter of earners in the United States. If your standard of living requires an income higher than $30,000 a year, you need to consider how you will supplement your benefits.
Original Medicare Doesn’t Cover Everything
Medicare parts A and B are considered Original Medicare. Medicare A is hospital insurance and covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health care. Medicare B is general medical insurance and covers certain doctors’ services, outpatient care, and preventative services.
Healthcare services such as dental and vision care are not covered by Original Medicare.
If you need extra benefits like prescription drug coverage, dental, hearing, vision, and others, you should consider enrolling in Medicare Part C, also called Medicare Advantage.
There are also a variety of Medicare Advantage plans available to meet your unique needs during retirement.
Understanding how Medicare works in retirement isn’t easy. Luckily, you’re not alone. If retirement is in your near future, make sure you’re prepared by scheduling an appointment with a Medicare Advisor in your community.